small investor, financial literacy, financial awareness, financial inclusion….what an amazing array of words we have created for bureaucrats, politicians, businessmen, capital market pundits to meet and eat!

Frankly if you want to climb the Himalayas you need to join a Gym get into good shape and then climb the Himalayas.

In the investment arena you have bureaucrats with indexed pensions regulating a market in which they do not have the guts to invest. Many of the promoters who enter the markets have no respect for the regulator or for the little fool who parts with his money. So one day if the promoter is caught with his hand in the cookie jar, he breaks the jar and goes away to do something else. Amazing how our regulators take a fee and give a license to anybody and everybody who claims to be interested in the business. Once upon a time there were 600 category 1 Merchant bankers, and there was enough business for about 6 of them. Every group worth his salt had a finance company which was a CAT 1 Merch Banker!

Then everybody became a member at NSE (including yours truly through a corporate entity). Then zillions of them closed down.

Now the only 2 businesses in the financial services business which makes money are banking and broking. Life insurance and mutual funds in the current form will not make money unless there is something which I cannot understand. If you thought brokerage was so low and it cannot be profitable, think again. If you invest Rs. 100,000 in a mutual fund, SEBI decides how much the asset management company can make. If you buy a ULIP IRDA decides your profit margin – and post 1st Sep the margins would have been crushed.

However in brokerage business you can go into the market with Rs. 100,000 and lose Rs. 100,000 to brokerage. Sounds cruel, well I have heard horror stories – readers are welcome to share their experiences.

What can the regulator do? Put a limit on how much brokerage a brokerage firm can charge from a client – either as a %age of his / her portfolio or as a % age of the profit that a customer makes.

Will it happen? Of course not.

Should it happen? But of course. 🙂

PS: I read somewhere that so much of good legislation has happened in the past one year that the Retail investor’s life will now be fine. The changes being the changes in banking, Irda, abolishing of mutual fund loads,….

BUT I am sure that things will not change anything for the ‘retail’ investor – after all there is no law against foolishness :). And the retail investor is very poor in execution.

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  1. Some time back there was a news item that kingfisher airlines owes crores of rupees to oil companies and also threaten to stop fuel supply if dues were not cleared….now read this from s.p.tulsian site:
    Vijay Mallya owns a 311-foot yacht, the Indian Empress, usually anchored off the French Riviera. He owns 45 villas and island homes scattered across the world, nearly 250 vintage cars, a customised Boeing 727, two corporate jets and three yachts, including the Kalizma, a 165-footer once owned by actor Richard Burton.
    Subra your comments will be interesting………..

  2. By making Mutual Funds not viable for the Distributor, the small investor are being sold ULIPs/Insurance products..

    Since the small investor was anyways unknown about MFs, there is no way he can come back to buying it EVEN if he asks for it as nobody sells it now..
    In one of the discussions I read online, a guy from the insurance industry says even MF agents should give an illustration when they sell MFs just like in Insurance.. to highlight the FMC..!
    its open to debate if this helps the guy who started the discussion so that people buy more ULIPs or the POOR SMALL INVESTOR by confusing him more…

  3. Mr.Panjwani. People living in glass houses can get stoned. Its us poor folks living in jhopad pattis who have to be wary.

  4. Arun
    I have no worries about people living in glass, but first pay the amount outstanding to poor oil companies…subsequently….people even can live in houses made of gold…..i have no issues….

  5. Pingback: Financial Inclusion & Financial Literacy: Intentions & Realities | Ranjan Varma's Blog

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